Capital Group investment director Steve Smith on the onset of a new economic era, the power of disruption and targeting multi-year trends
An ‘industrial renaissance’ and a golden era of healthcare innovation are among the investment themes of particular interest to the team behind Capital Group’s New Perspectives strategy, according to Steve Smith, an investment director at the company.
“We are in the early innings of a profound secular change, the scale of which we typically only see every 10 to 15 years,” he says in the above video, which was filmed at Wealthwise’s inaugural Wealth Forum towards the end of last year.
“If we are correct that we have entered a new economic and geopolitical era, this will likely define the next decade of equity market investing. Our view is that, over this next cycle, we will likely see a greater breadth of equity market leadership compared to much of the last 15 years, which has been very one-dimensional and binary.”
Obviously we need to distinguish between short-term hype and long-term investment reality.”
Smith goes on to say the New Perspectives team continues to believe in the power of innovation and disruption – particularly in the digital space, adding: “Artificial intelligence does have the potential to be the next disruptive tech mega-cycle – but obviously we need to distinguish between short-term hype and long-term investment reality.”
Multi-decade tailwinds
“We also believe we are entering a golden era of healthcare innovation, which will have multi-decade tailwinds, driven by the rapid increase in novel drug platforms that is really accelerating the pace of drug innovation and drug discovery.
“Something else we are interested in is what we are calling an ‘industrial renaissance’. There are a number of previously ‘boring’, old-economy, capital-intensive manufacturers of physical things – and a number of these industrial and related companies could be transforming themselves into secular growth companies because they are enabling and benefitting from various multi-year trends that could set the stage for a capex supercycle and drive a period of sustained earnings growth for these companies.”
Smith suggests such multi-year trends would include energy transition, energy security and a growing focus on the resilience and robustness of supply chains, rather than their efficiency. “It would also include the global build-out of data centres where AI workloads will run – and just greater defence spend amid a more elevated, permanently heightened geopolitical risk environment,” he adds. “All of these multi-year trends require the manufacturing of physical things that could lead to an industrial resurgence.”
You can view the whole video by clicking on the picture above, while the timecodes for individual questions are:
00.00: What is the New Perspective strategy and what is it aiming to achieve?
01.00: What are the strategy’s differentiating factors?
03.37: What are your current views on markets and how is the New Perspective strategy positioned?
